COURT FILE NO.: 16-67707

DATE: 2018/05/23

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

TRUESTAR INVESTMENTS LTD.

Plaintiff

– and –

IRIS BAER and JOSEPH CASSIDY

Defendants

Michael Hebert, for the Plaintiff

Ryan Garrett and Danielle Perras (student-at-law), for the Defendant, Iris Baer, no one appearing for the Defendant, Joseph Cassidy

HEARD: September 12, 2017

RULING ON MOTION FOR SUMMARY JUDGMENT

CORTHORN J.

Background

[1] The plaintiff (“Truestar”) is both a creditor and the assignee of the trustee in bankruptcy of 951584 Ontario Inc. (“Greenview”). In the latter capacity, Truestar seeks declaratory and other relief related to the transfers of properties by Greenview to the defendant, Iris Baer (“Baer”). The transfers were effected in August 2012—less than three months prior to the date on which Greenview filed a notice of intention to make a proposal in bankruptcy

[2] In total, six properties were transferred. The properties fall into two categories—three parcels of land referred to as “the Harcourt Properties” and three parcels of land referred to as “the Barry’s Bay Properties”. Collectively, the six parcels are referred to as the “Properties” and the transfers of the Properties as the “Transfers”.

[3] Baer is a former shareholder and director of Greenview. She is the spouse of Frank Yantha (“Yantha”). As of the dates of the Transfers, Yantha was the sole shareholder and director of Greenview.

[4] In 2014, the Municipal Property Assessment Corporation (“MPAC”) assessed values for the Harcourt Properties at $46,300, and for the Barry’s Bay Properties at $180,000.

[5] The stated consideration for the 2012 transfer to Baer of the Harcourt Properties is $2,704. None of that amount was paid by Baer to Greenview.

[6] The stated consideration for the 2012 transfer to Baer of the Barry’s Bay Properties is $90,000. In March and April 2012, Baer made a series of three payments to Greenview totalling $90,000. Baer’s evidence is that the three payments were the consideration for the transfer of the Barry’s Bay Properties.

[7] The first of the three payments was in the amount of $60,000 and made by bank transfer. Greenview utilized these funds to pay $59,250 to the Ontario Power Authority for liquidated damages related to the completion of a biomass facility in Harcourt. The second and third payments were each made by cheque. The cancelled cheques do not include any information or notation to identify the purpose of each cheque.

[8] In the Statement of Affairs filed by Greenview in February 2013, as part of the bankruptcy process, the assets listed include “Real property or immovable” with a total value of $500,000. The Properties are not included in the assets identified in that document.

[9] Truestar and Baer agree that the matter is appropriate for determination by summary judgment. Cassidy did not defend the action, was not served with the materials on the motion for summary judgment, and was not represented on the return of the motion.

Positions of the Parties

a) Truestar

[10] Truestar relies on three alternative arguments in support of the relief it requests. First, Truestar relies on s. 96(1)(b) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“BIA”). That section sets out the circumstances in which a non-arm’s length transfer may be declared void or monetary compensation may be ordered for a transfer at undervalue.

[11] Truestar submits that the evidence supports findings that:

• The Transfers were made at undervalue;

• Baer and Greenview were not dealing at arm’s length; and

• The Transfers occurred within the one-year period prior to the initial bankruptcy event.

[12] Truestar requests a declaration that the Transfers are void or, in the alternative, an order that Baer pay to Truestar the difference between the fair market value of the Properties and the consideration, if any, paid by Baer in respect of the Transfers.

[13] Truestar submits that if it is found that the Transfers were made at arm’s length, the criteria to either set aside or order monetary compensation with respect to the undervalued transfers are met. In that regard, Truestar relies on s. 96(1)(a) of the BIA.

[14] Second, Truestar relies on the criteria set out in s. 95(1) of the BIA for a fraudulent preference to be set aside. Truestar submits that:

• Greenview was insolvent at the time of the Transfers;

• The Transfers occurred within three months prior to the date of the initial bankruptcy event; and

• The Transfers had the effect of giving Baer a preference over other creditors at the time.

[15] Third, Truestar submits that the Transfers are void as fraudulent conveyances within the meaning of s. 2 of the Fraudulent Conveyances Act, R.S.O. 1990, C. F.29 (“FCA”). Truestar highlights that the Transfers were made (a) after Greenview defaulted on a financing arrangement with Pacific & Western Bank of Canada (“PWBC”), and (b) less than three months prior to Greenview’s initial bankruptcy event. The Transfers were at well less than the assessed values of the respective Properties. As such, it was Greenview’s intention to defeat its creditors.

[16] Truestar recognizes that it has the burden of establishing a fraudulent intention on the part of Greenview. Truestar submits that there are a number of badges of fraud in respect to the Transfers. If the court finds that one or more badges of fraud exist, then the burden shifts to Baer to provide an alternate explanation for the Transfers. Truestar submits that Baer has not, in response to the motion for summary judgment, provided an explanation to displace the badge(s) of fraud.

b) Baer

[17] Baer argues that the outcome of the motion turns on the findings made with respect to the consideration given for the Transfers. Baer submits that upon reviewing the history of the dealings between Greenview, Baer, and a numbered company of which Baer is the sole owner, it is clear that (a) the Transfers were not made at undervalue, and (b) there was no intention on the part of Greenview to defraud its creditors.

[18] With respect to each of the Harcourt Properties and the Barry’s Bay Properties, Baer advances an alternative argument. Baer submits that (a) Greenview held the Harcourt Properties in trust for Baer pursuant to a resulting trust, and (b) the transfers of the Harcourt Properties in August 2012 were made pursuant to the terms of a verbal trust agreement.

[19] Baer acknowledges that the existence of the resulting trust is not explicitly pleaded in her statement of defence. Baer requests that the court determine the summary judgment motion on the basis that leave to make the requisite amendment to the pleading to address the resulting trust was requested and granted.

[20] The alternative argument with respect to the Barry’s Bay Properties relates to a mortgage to Greenview from Baer’s numbered company, in the amount of approximately $162,000. The mortgage remained on title until the Properties were transferred to Baer. Subsequent to the date of the Transfers, Baer arranged for the mortgage to be discharged even though the full amount owed on the mortgage remained outstanding.

[21] Baer argues that the relief, if any, granted with respect to the Barry’s Bay Properties must take into consideration the $162,000 mortgage to Greenview in favour of Baer’s numbered company. Baer submits that:

a) If the transfers of the Barry’s Bay Properties are to be set aside, then the mortgage should be placed back on title; or

b) If monetary compensation is ordered, then the amount to be paid should take into consideration the amount forgiven by Baer’s numbered company when the mortgage was discharged.

The Issues

[22] The issues to be determined on the motion for summary judgment are:

1. Were the transfers of the Harcourt Properties and/or the Barry’s Bay Properties “at undervalue” within the meaning of either ss. 96(1)(a) or (b) of the BIA?

2. Did the transfers of the Harcourt Properties and/or the Barry’s Bay Properties give Baer a “preference”, within the meaning of s. 95(1) of the BIA, over Greenview’s other creditors?

3. Were the transfers of the Harcourt Properties and/or the Barry’s Bay Properties “fraudulent” within the meaning of s. 2 of the FCA?

4. To what relief, if any, is Truestar entitled?

Motion for Summary Judgment

[23] I agree with Truestar and Baer that this matter is appropriate for determination on a motion for summary judgment (Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 20.04(1)(b) (“Rules”)).

[24] The record includes an affidavit sworn by Baer and the transcript of her cross-examination on that affidavit. In responding to the motion, Baer chose not to rely on evidence from any other individual.

[25] Much of the evidence is undisputed—for example, the dates of the Transfers, the stated consideration for the Transfers, the timing of the Transfers in relation to Greenview’s first bankruptcy event, and the history of transactions related to the Properties. Baer submits that her evidence is unchallenged because no reply affidavit was delivered on behalf of Truestar. It is clear, however, that Truestar challenges some aspects of Baer’s evidence on the basis of lack of credibility.

[26] I am satisfied that I am in a position to make findings of credibility, where required. Truestar requests that a number of inferences (including adverse inferences) be drawn by reason of the lack of evidence from Yantha (Baer’s spouse and the sole owner and director of Greenview, the latter as of the date of the Transfers). I am also satisfied that I am in a position to determine whether inferences are to be drawn (Rules, r. 20.02 (1)).

[27] In summary, I find that there is no genuine issue requiring a trial and the record is such that I am able to “fairly and justly adjudicate the dispute [on] a timely, affordable and proportionate” motion for summary judgment (Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 66).

Issue No. 1 – Transfer at Undervalue (s. 96(1) of the BIA)

[28] Truestar’s position is that whether the Transfers were at arm’s length (“AL”) or non-arm’s length (“NAL”), the requisite criteria are met to support a finding that the Transfers were made at undervalue. The primary position taken by Truestar is that the Transfers were between NAL parties. On that basis, and pursuant to s. 96(1)(b)(i), Truestar need satisfy only two criteria for entitlement to relief. Truestar must demonstrate that the Transfers were:

a) At undervalue within the meaning of the BIA; and

b) Made within a year prior to the first bankruptcy event.

[29] If the Transfers are found to be between AL parties, then two additional criteria must be satisfied:

c) Greenview was insolvent at the time of the Transfers or rendered insolvent by them; and

d) Greenview intended to defraud, defeat, or delay a creditor (s. 96 (1)(a)(i) – (iii) of the BIA).

[30] I turn first to determine whether the Transfers were between AL or NAL parties.

a) Relationship Between Transferor and Transferee

[31] The BIA does not include a definition of NAL for the purpose of s. 96 of the Act. It is therefore necessary to look to the case law for the applicable definition of “non-arm’s length”. The following definition has previously been relied on by this Court:

Section 96 is directed at transfers by insolvent persons for a consideration that is materially or significantly less than the fair market value of the property. In this context, the concept of a non-arm’s length relationship is one in which there is no incentive for the transferor to maximize the consideration for the property being transferred in negotiations with the transferee. It addresses situations in which the economic self-interest of the transferor is, or is likely to be, displaced by other non-economic considerations that result in the consideration for the transfer failing to reflect the fair market value of the transferred property (Re: National Telecommunications Inc., a bankrupt, 2017 ONSC 1475, at para. 43, quoting Wilton-Siegel J. in Juhasz Estate v. Cordeiro, 2015 ONSC 1781, at para. 41).

[32] There is no evidence before the Court to suggest that Greenview and Baer were dealing in any manner other than NAL. The history of Greenview as a corporation, and the various transactions that occurred between Greenview, Baer, her numbered company, Yantha, and Yantha’s business associates make it clear that the Transfers were carried out at NAL.

[33] Therefore, the criteria to be applied in determining whether the Transfers were at undervalue, are the two set out in s. 96(1)(b)(i) of the BIA.

b) First Criterion – Transfer at Undervalue

[34] “Transfer at undervalue” is defined in s. 2 of the BIA as, “a disposition of property or provision of services for which no consideration is received by the debtor or for which the consideration received by the debtor is conspicuously less than the fair market value of the consideration given by the debtor.”

i) Harcourt Properties

[35] In support of her argument that the August 2012 Transfers for $2,107.44 (although not paid) were not undervalue, Baer relies on the value at which the Harcourt Properties were historically transferred. That argument misses the point for a number of reasons.

[36] First, the historical transfers were between individuals and/or corporations in whom the individuals had an interest. The historical transfers were for business and other reasons, including, purportedly, assisting Greenview in securing financing for its business ventures. I note that on one occasion, 50 per cent of the Harcourt Properties was transferred for $2,107.44 (April 9, 2009). Within days of that transfer (April 14, 2009), the entirety of the Harcourt Properties was transferred, from Baer to Greenview, for the same consideration—$2,107.44. The consideration for that transfer was never paid.

[37] There is no evidence to support a finding that the transfers of the Harcourt Properties in 2009 were at fair market value.

[38] Second, going back in time to 2005, and the earliest of the transfers that included the Harcourt Properties, provides evidence in support of a finding that the transfers of the Harcourt Properties in both 2009 and 2012 were at undervalue.

[39] When Baer and her numbered company originally purchased the Harcourt Properties and an adjacent parcel in 2005 (“Mill Property”), the consideration paid was $571,225. The Mill Property was sold in 2009 for a total of $367,500. Assuming no increase in the value of the subject properties between 2005 and 2009, the value of the Harcourt Properties as of 2009 was $203,725 ($571,225 – $367,500).

[40] The third reason is the 2014 MPAC assessment of $46,300 for the Harcourt Properties. There is no evidence to explain (a) the basis for the consideration paid for the Harcourt Properties and the Mill Property in 2005, and (b) what appears to be a drop in the value of the Harcourt Properties from 2005 and/or 2009 to 2014. There is no evidence to suggest that the fair market value of the Harcourt Properties in 2012 was lower than $46,300 by a significant amount, if by any amount at all.

[41] I find that the transfers of the Harcourt Properties from Greenview to Baer, in August 2012, were at undervalue.

ii) Barry’s Bay Properties

[42] Greenview purchased the Barry’s Bay Properties in 1997 for $155,000. There were no transfers of these properties prior to the Transfers to Baer in August 2012.

[43] Between 1997 and 2012, a numbered company owned by Baer registered a mortgage against the Mill Property, the Barry’s Bay Properties, and the Harcourt Properties in the amount of $1,200,000 (“Mill Mortgage”). By August 2012, the Mill Mortgage had been discharged from the title to the Harcourt Properties and the title to the Mill Property. The latter property had, by that date, been sold.

[44] As of August 2012, (a) only $162,000 had been advanced by Baer’s numbered company to Greenview pursuant to the Mill Mortgage, (b) the Mill Mortgage was reduced to that amount, and (c) the only properties against which security for that amount was registered were the Barry’s Bay Properties. That reduced mortgage is the subject of Baer’s alternative argument discussed below under Issue No. 4.

[45] The 2014 MPAC assessment of the fair market value of the Barry’s Bay Properties is $180,000. In 2008, the MPAC assessment was $106,000. There is no evidence to suggest that between the date of Greenview’s purchase of the properties and the date of the Transfers, the fair market value of the Barry’s Bay Properties dipped below the original purchase price or below a six-figure number.

[46] Baer argues that the total consideration paid in 2012 for the Barry’s Bay Properties is $252,000. She combines the $90,000 paid to Greenview in the spring of 2012 with the amount owing on the Mill Mortgage. For that argument to succeed, the Court must be satisfied that (a) the $90,000 paid in three instalments, approximately four to five months prior to the date of the Transfers, relates to the Barry’s Bay Properties, (b) the monies advanced pursuant to the Mill Mortgage bear any relationship to the fair market value of the Barry’s Bay Properties, and (c) Baer assumed the Mill Mortgage.

[47] I turn first to the three payments totaling $90,000 made in the spring of 2012. Baer’s evidence is that the agreement to transfer the Barry’s Bay Properties to her was reached with Greenview in early March 2012.

[48] There is no documentary evidence to support either the existence of such an agreement or a finding that the $90,000 paid by Baer to Greenview, in March and April 2012, was in any way related to the Barry’s Bay Properties. With respect to the $90,000 paid to Greenview, I note the following:

• On March 22, 2012, there was a transfer of $60,000 from Baer’s personal chequing account with the Barry’s Bay Credit Union;

• The transfer is said by Baer to have been to a bank account for Greenview;

• Immediately following receipt of the $60,000, Greenview paid $59,250 owing by it to the Ontario Power Authority;

• Had the $59,250 not been paid by Greenview at that time, the amount it owed to the Ontario Power Authority would have continued to increase; and

• There is nothing in writing on or about the two personal cheques from March ($10,000) and April ($20,000) 2012, to indicate that they relate in any way to the Barry’s Bay Properties.

[49] Baer’s evidence is that the delay between the spring of 2012, when the $90,000 was paid, and August 2012, when the Transfers were registered on title, was the result of her being very busy and not attending to the requisite paperwork in a timely manner.

[50] I agree with the submission on behalf of Truestar: greater emphasis is to be placed on Baer’s conduct than on her evidence with respect to the transfers of the Barry’s Bay Properties. When all of the evidence with respect to those transfers is considered, it is not possible to reconcile Baer’s evidence with her conduct at the material times.

[51] As one example, there is the mortgage of $162,000 registered on the Barry’s Bay Properties prior to the date of the Transfers. Baer’s evidence is that in addition to paying $90,000 for the Barry’s Bay Properties, she assumed the $162,000 mortgage owing on the Mill Mortgage. For the following reasons, I reject that evidence and find that, even if Baer had paid the $90,000 for the purchase of the Barry’s Bay Properties (and I find that she did not), the consideration for those properties did not include the assumption of the $162,000 mortgage:

• There is no documentation to support Baer’s evidence with respect to the total consideration paid by Baer for the purchase of the Barry’s Bay Properties;

• There are no documents as between Greenview, Baer, and the numbered company with respect to the assumption of the Mill Mortgage;

• The Land Transfer Tax Statement identifies $90,000 as the “total consideration” for the Barry’s Bay Properties; and

• The Land Transfer Tax Statement does not identify any mortgage being assumed by Baer.

[52] Baer is not an unsophisticated person in respect of either the operation of a business or to real estate transactions. She is a person of education and experience. She worked in the public sector in Germany before immigrating to Canada. She worked and continues to work in the private sector in Canada, as an owner and director of a number of privately-held companies. For a number of years prior to 2012, Baer was involved in financial and real property transactions with one or more of her spouse, companies owned in whole or in part by her spouse, and the business associates of her spouse.

[53] I find that Baer was fully aware in August 2012 that she was representing a purported purchase price of $90,000 for the Barry’s Bay Properties. I find that the contents of the Land Transfer Tax Statement are not, as Baer has suggests, an error on the part of her real estate lawyer.

[54] I say “purported” purchase price because I find that the $90,000 paid in the spring of 2012 was not paid for the purchase of the Barry’s Bay Properties. Even if the $90,000 could be said to be the purchase price, it is half of the fair market value identified in the 2014 MPAC assessment. As such, it would be a transfer at undervalue.

c) Second Criterion – Timing of Transfer

[55] The second criterion under either of the AL and NAL scenarios is that the transfer occurred within the year prior to the date of the initial bankruptcy event (BIA, ss. 96(1)(a)(i) and (b)(i)). There is no doubt that the August 2012 Transfers were within the year prior to the October 2012 date on which Greenview filed its notice of intention to make a proposal.

[56] I find that the second criterion under either scenario is satisfied.

d) Summary

[57] The Transfers were at undervalue within the meaning of s. 2 of the BIA. Truestar is entitled to relief pursuant to s. 96(1)(b) of the BIA.

Issue No. 2 – Preference (s. 95(1) of the BIA)

[58] Section 95(1) of the BIA sets out the criteria to be met for a finding that an insolvent person has transferred property to an individual and, in so doing, created a preference to that individual over another of the transferor’s creditors.

[59] Section 95 addresses both AL and NAL transactions. Given my finding that the Transfers from Greenview to Baer were NAL, the applicable criteria are those set out in s. 95 (1)(b):

A transfer of property made, a provision of services made, a charge on property made, a payment made, an obligation incurred or a judicial proceeding taken or suffered by an insolvent person,

(b) in favour of a creditor who is not dealing at arm’s length with the insolvent person, or a person in trust for that creditor, that has the effect of giving that creditor a preference over another creditor is void as against—or, in Quebec, may not be set up against—the trustee if it is made, incurred, taken or suffered, as the case may be, during the period beginning on the day that is 12 months before the date of the initial bankruptcy event and ending on the date of the bankruptcy.

[60] Section 95 requires that the transferor be “an insolvent person” at the date of the subject transfer. When cross-examined, Baer maintained that Greenview was not insolvent as of November 2012 when it filed a notice of intention to make a proposal in bankruptcy. Baer’s evidence is that the purpose of filing the notice was as “protection [for Greenview] to get some time to get everything in place” (Transcript of Baer Cross-Examination, at p. 29).

[61] When presented with the wording of the notice of intention, Baer acknowledged that as of November 22, 2012, Greenview was “an insolvent person”. She also acknowledged that within the bankruptcy proceeding, she was identified personally as an unsecured creditor of Greenview in the amount of $105,350.

[62] In the Statement of Affairs dated February 2013 and filed by Greenview in the bankruptcy proceeding, Greenview’s liabilities total $6,240,580; its assets total $783,325; and the deficiency identified is $5,457,255 (approximately 88 per cent of the liabilities).

[63] Based on the timing of the Transfers and the contents of the Statement of Affairs, I draw an inference and find that Greenview was insolvent when the Transfers were made.

[64] As I have already noted, the Properties are not listed as part of the assets of Greenview. They could not be; they were transferred to Baer in August 2012. The effect of the Transfers was to remove real property valued by MPAC at approximately $230,000 from Greenview’s assets and to give the Properties to one of Greenview’s unsecured creditors (Baer) less than three months before the date of the initial bankruptcy event. In the circumstances, Baer was given preference over other creditors of Greenview.

[65] I find that in addition to being transfers at undervalue, the Transfers constitute a preference within the meaning of s. 95(1)(b) of the BIA.

Issue No. 3 – Fraudulent Conveyance (s. 2 of the FCA)

[66] The Transfers occurred (a) after Greenview went into default with one of its largest creditors (PWBC), and (b) less than three months before Greenview filed its notice of intention to make a proposal in bankruptcy. The Transfers were from Greenview to the spouse of Greenview’s principal. The consideration paid (if paid at all) for the Properties was well below fair market value.

[67] A “fraudulent conveyance” is defined in s. 2 of the FCA:

Every conveyance of real property or personal property and every bond, suit, judgment and execution heretofore or hereafter made with intent to defeat, hinder delay or defraud creditors or others of their just and lawful actions, suits, debts, accounts, damages, penalties or forfeitures are void as against such persons and their assigns.

[68] Sections 3 and 4 of the FCA set out an exception to the application of s. 2 to transactions in issue. For the exception to apply, the purchaser must have paid “good consideration”, made the payment “in good faith”, and lacked knowledge of the intention of the transferor at the time of the transfer.

[69] For the reasons set out above under Issue Nos. 1 and 2, I find that Baer is not entitled to rely on the exception created by ss. 3 and 4 of the FCA. Baer did not pay “good consideration” and, assuming she paid consideration (and I find that she did not), did not make the payment “in good faith”. Given my findings in that regard, it is not necessary to address whether Baer had or lacked knowledge of Yantha’s intention, at the time of the Transfers, to defeat, hinder, delay, or defraud creditors or others.

[70] The Transfers bear badges of fraud including that:

a) The consideration paid, even assuming the alleged consideration was paid, was grossly inadequate; and

b) There was a close relationship between the debtor/transferor (Greenview) and the recipient (Baer) of the property. (See Indcondo Building Corporation, 2014 ONSC 4018, at para. 52, aff’d 2015 ONCA 752.)

[71] Taking into consideration these badges of fraud, I find that Truestar has raised a prima facie case of fraud in relation to the Transfers. As a result, Baer has the burden of providing a reasonable alternative explanation in support of the Transfers. For the reasons discussed above under Issue Nos. 1 and 2, I find that Baer has failed to do so.

[72] Baer did not offer an alternative reasonable explanation with respect to the transfer of the Barry’s Bay Properties.

[73] The alternative reasonable explanation upon which Baer relies with respect to the Harcourt Properties is that Greenview held the properties from 2009 to 2012 on the basis of a resulting trust in favour of Baer. For the reasons set out immediately below, I reject that explanation.

a) Resulting Trust – Harcourt Properties

[74] Baer argues that the Harcourt Properties were transferred to her in 2012 pursuant to the terms of a resulting trust. Baer relies on the existence of a resulting trust because property held by a bankrupt in trust does not fall within the bankrupt’s estate.

[75] A resulting trust is not, however, formally part of Baer’s pleading. Even if the pleading were amended as suggested on the return of the motion, my finding would remain the same: the evidence does not support a finding that Greenview held the Harcourt Properties pursuant to a resulting trust.

[76] There are no documents to support the existence of a trust agreement. There is no evidence from Yantha to corroborate Baer’s evidence with respect to a resulting trust.

[77] I also consider Baer’s intention when she transferred the properties to Greenview in April 2009. Baer’s evidence is that the Harcourt Properties were transferred to Greenview at that time for the sole purpose of assisting Greenview in securing financing. Once again, it is not possible to reconcile Baer’s evidence with what actually transpired.

[78] Two charges were registered against the Harcourt Properties subsequent to the 2009 transfer of those properties from Baer to Greenview and prior to the 2012 transfer back to Baer. The first charge was to Joseph Cassidy (“Cassidy”), registered in January 2010, and in the amount of $150,000 (“Cassidy Mortgage”). The second charge was the Mill Mortgage, registered in August 2010, and in the amount of $1,200,000.

[79] The timing of the registration of the Cassidy Mortgage and Mill Mortgage on the Harcourt Properties in relation to the timing of Greenview’s negotiations with PWBC runs contrary to Baer’s evidence that Greenview’s ownership of the Harcourt Properties was an important factor in it securing financing. Baer’s evidence is that Greenview began negotiations with PWBC in September 2010—eight months after the Cassidy Mortgage was registered on title, and one month after the Mill Mortgage was registered on title. Ultimately, PWBC did not register any security against the Harcourt Properties.

[80] The Cassidy Mortgage to Greenview was discharged in September 2011. After the Transfers in August 2012, another mortgage given by Cassidy, in the amount of $100,000, was registered against the Harcourt Properties. Baer’s evidence is that the same mortgage had previously been registered against farm property that she owns. Baer submits that (a) because of that mortgage, she was able to advance $37,000 to Greenview after the date of the Transfers, and (b) the $37,000 forms part of the consideration for the transfer of those properties.

[81] I find that Cassidy was someone to whom Baer and her spouse turned from time to time for financial assistance; when that assistance was provided, Cassidy secured the debt by registering a mortgage on title to one or more properties owned by Baer, Yantha, and/or their companies. I find that the transfer of the Harcourt Properties to Greenview in 2009 was not required to secure financing from Cassidy (i.e. the mortgage in the amount of $150,000 registered on those properties in 2010).

[82] I find that the Harcourt Properties were not transferred from Baer to Greenview in 2009 (a) pursuant to a resulting trust, and (b) for the purpose of assisting Greenview in securing financing.

b) Summary – Fraudulent Conveyance

[83] I find that (a) Truestar established a prima facie case of fraudulent conveyance with respect to the Transfers, and (b) Baer failed to provide a reasonable alternative explanation in support of the Transfers. Truestar is entitled to relief pursuant to the FCA.

Issue No. 4 – Relief

a) Relief Generally

[84] The relief to which Truestar is entitled as a result of one or both of the findings with respect to the Transfers at undervalue and a fraudulent preference are (a) a declaration that one or more of the Transfers is void as against Truestar (as the assignee of the trustee in bankruptcy of Greenview), or (b) an order that Baer pay to the bankrupt’s estate the difference between the value of the consideration received by Greenview from Baer and the value of the consideration paid by Greenview when it acquired the Properties.

[85] The relief to which Truestar is entitled as a result of the finding that the Transfers constitute fraudulent conveyances is a declaration that the Transfers are void as against the creditors of Greenview.

[86] The factum filed on behalf of Truestar on this motion states: “[o]wnership of the Harcourt Properties appears to have been frequently shuffled to suit Greenview’s purposes”. I agree with that statement. I find that to require the parties to address the issues of consideration received and paid by Greenview over time—in particular with respect to the Harcourt Properties—it would only serve to prolong the litigation unnecessarily and lead to inefficiencies.

[87] I find that the appropriate relief is to declare the Transfers to be at undervalue and order that they be set aside. My finding in that regard is, however, subject to a determination of Baer’s alternative argument with respect to the Barry’s Bay Properties.

b) Mortgage on Barry’s Bay Properties

[88] Baer’s alternative argument with respect to the Barry’s Bay Properties is that if the transfers of those properties are set aside, then the discharge of the Mill Mortgage ($162,000) registered by Baer’s numbered company on the title to those properties is also to be set aside. If Baer’s alternative argument succeeds, then any subsequent transfer of the Barry’s Bay Properties would be subject to the $162,000 mortgage.

[89] Baer’s evidence is that she would never have discharged the Mill Mortgage from the Barry’s Bay Properties if she had known that “a party like Truestar would take issue with the transfer of the Barry’s Bay Properties to [her]”. First, it is important to note that the Mill Mortgage was granted by Baer’s numbered company and not by Baer herself. It was the numbered company (1245906 Ontario Inc. and hereinafter “124 Inc.”) and not Baer personally that agreed to the discharge of the Mill Mortgage from the Barry’s Bay Properties.

[90] Second, 124 Inc. is not a party to the motion for summary judgment. There is no evidence to suggest that the notice of motion, motion record, factum, and book of authorities on behalf of Truestar were served on 124 Inc.

[91] Rule 37.07(1) of the Rules requires that a notice of motion “shall be served on any party or other person who will be affected by the order sought, unless these rules provide otherwise.” I am reluctant to grant relief that affects a corporate entity that is not a party to this motion (or the action) without first giving that party an opportunity to file evidence, if it wishes to do so, in response to the relief requested. The fact that Baer is the principal of 124 Inc. is not sufficient to address the lack of service of the materials on that corporation.

[92] As a result, the issues raised by Baer’s alternative argument with respect to the Barry’s Bay Properties remain to be determined. Truestar shall take steps necessary to bring that matter before me in compliance with r. 37.07(1) of the Rules.

Summary

[93] In summary, the following relief is granted:

a) A declaration is granted that the Transfers are at undervalue and therefore void as against the trustee in bankruptcy of Greenview;

b) The Transfers of the Properties, described in paragraphs 1(a) and (d) of Truestar’s notice of motion dated November 24, 2016, shall be set aside;

c) The proceeds of sale of one or more of the Properties, if disposed of by Baer, shall be traced;

d) The trustee in bankruptcy of Greenview is prohibited from selling the Properties pending a further order of the Court with respect to the Mill Mortgage registered on the title to the Barry’s Bay Properties as of August 2012; and

e) Truestar shall take the steps necessary, including service on 124 Inc. of a copy of this Ruling and of the order taken out pursuant to this Ruling, to bring back before me the issue of Truestar’s request for the transfers of the Barry’s Bay Properties to be set aside outright.

[94] With respect to paragraph (c) above, there is no evidence before the Court that any one of the Properties was sold by Baer subsequent to the date of the Transfers. In the event Truestar learns of such a transfer, it shall take the steps necessary to bring the issue of tracing of proceeds before me either at the same time as or separate from the determination of the issues with respect to the Mill Mortgage and the Barry’s Bay Properties.

[95] I remain seized of this matter.

Costs

[96] Costs of the motion for summary judgment to date shall be determined subsequent to the determination of Baer’s alternative argument with respect to the $162,000 mortgage and any other substantive issues arising from this Ruling.

Madam Justice Sylvia Corthorn

Date: May 23, 2018

COURT FILE NO.: 16-67707

DATE: 2018/05/23

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

TRUESTAR INVESTMENTS LTD.

Plaintiff

– and –

IRIS BAER and JOSEPH CASSIDY

Defendants

RULING ON MOTION FOR SUMMARY JUDGMENT

Madam Justice Sylvia Corthorn

Released: May 23, 2018